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Price Indices

Price Indices. LG: I can describe various indices used in the media and I can use these indices to solve problems. What is a Price Index ?. A Price Index describes the price of an item compared to a base value measured at a particular time or in a particular place.

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Price Indices

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  1. Price Indices LG: I can describe various indices used in the media and I can use these indices to solve problems

  2. What is a Price Index? • A Price Index describes the price of an item compared to a base value measured at a particular time or in a particular place. • Price indices help citizens, industries and businesses follow and predict trends in pricing.

  3. Consumer Price Index (CPI) • The CPI is a measure of the change in price of common household items • Calculated by determining the average cost of 600 popular goods and services • The average annual percentage change in the CPI is a measure of inflation.

  4. Canadian CPI Trends If a car costs $23 000 in 2014 and the same model cost $19 000 in 2002, what is the percent price increase?

  5. CPI Weights • Different items account for different percentages of the CPI

  6. Interpreting the CPI • What is the base year for the CPI? • How long did it take the cost of the basket of goods to double from the base year? • What is the CPI value for 2000? What does this mean?

  7. Making Predictions Based on the CPI • Using the graph, determine the average rate of inflation (% per year) from January 2009 – January 2014 • Predict the CPI value in 2018

  8. Using an Index to Make Comparisons • UBS financial services generated a report in 2012 which included a comparison of clothing prices in 71 cities. • What city determines the base price for clothing? • Which cities have and index value less than 100? What does this tell you? • How do clothing prices in Hong Kong and Tokyo compare to Toronto? • If Sydney was now used to determine the base price, how would the other values be affected?

  9. Other Types of Indices • Not all indices use a ‘base value’ for comparison • Example: Body Mass Index (BMI) – ratio of height to weight BMI

  10. Homework • Pg. 237 # 1 – 6

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